What was Cisco's revenue performance in the second quarter and year-to-date?

For the second quarter ended January 24, 2004, Cisco reported total net sales of $5.398 billion, a 14.5% increase compared to $4.713 billion in the same period last year. For the first six months of fiscal 2004, total net sales were $10.499 billion, up 9.8% from $9.558 billion in the prior year.

How did the adoption of FIN 46(R) impact net income?

The adoption of FIN 46(R) effective January 24, 2004, required Cisco to consolidate Andiamo Systems, Inc. and resulted in a non-cash cumulative stock compensation charge of $567 million (net of tax). This charge reduced reported net income for the quarter to $724 million and for the six-month period to $1.81 billion. Excluding this charge, net income before the accounting change was $1.291 billion for the quarter and $2.377 billion for the six months.

What is the company's outlook on liquidity and capital resources?

Cisco's liquidity remains strong, with cash and cash equivalents and total investments totaling $19.8 billion as of January 24, 2004. The company expects that cash generated from operations, combined with existing investments, will be sufficient to meet working capital needs, capital expenditures, investment requirements, stock repurchases, and other commitments for at least the next 12 months. Strategic uses of cash include share repurchases and acquisitions.

How did the company's product mix and gross margins evolve?

Gross margin for the quarter was 68.5%, down from 70.4% in the prior year. This decrease was primarily attributed to changes in product mix, including higher sales of lower-margin home networking products (due to the Linksys acquisition) and new product introductions in switching, as well as product pricing reductions. These factors were partially offset by lower manufacturing costs and higher shipment volumes. The company notes that product gross margins may not be sustainable at recent levels due to various market factors.

CSCO 10-Q Quarterly Report Q2 FY2004 — Revenue, Net Income, EPS

Summary

Cisco Systems, Inc. reported solid financial results for the second quarter and first six months ended January 24, 2004, demonstrating robust top-line growth and improving profitability. Net sales increased by 14.5% year-over-year for the quarter and 9.8% for the six-month period, driven by strong performance in the Americas and EMEA regions, as well as growth in product segments like routers and advanced technologies. The company also saw a significant improvement in profitability, with net income rising to $724 million in the quarter and $1.81 billion for the year-to-date period, compared to $991 million and $1.61 billion respectively in the prior year. This profitability improvement, despite a substantial one-time charge related to the adoption of FIN 46(R), indicates underlying operational strength. The company also continued its aggressive share repurchase program, underscoring its commitment to returning value to shareholders.

Key Highlights

1Total net sales grew by 14.5% year-over-year to $5.398 billion for the second quarter and 9.8% to $10.499 billion for the first six months.
2Net income for the quarter was $724 million ($0.10 per diluted share), which includes a significant $567 million (net of tax) charge related to the adoption of FIN 46(R) for Andiamo Systems, Inc. Before this charge, net income was $1.291 billion.
3Gross margin for the quarter was 68.5%, a slight decrease from 70.4% in the prior year, primarily due to product mix changes following acquisitions and price reductions, partially offset by lower manufacturing costs.
4Operating expenses saw a decrease in R&D due to cost control efforts, while Sales and Marketing and G&A expenses increased, partly due to foreign currency fluctuations and investments in marketing campaigns.
5The company maintained a strong balance sheet with cash and cash equivalents and total investments totaling $19.8 billion.
6Cisco continued its aggressive share repurchase program, buying back $4.0 billion in the first six months of fiscal 2004, with $8.1 billion remaining authorization.
7The acquisition of Latitude Communications, Inc. was completed in January 2004, enhancing Cisco's IP communications offerings.

CISCO SYSTEMS, INC. Quarterly Report for Q2 Ended Jan 24, 2004

Summary

Key Highlights

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